No longer the center of attention, you find yourself competing with a wider array of others. Eager anticipations have become strident expectations.
You rise and fall on your own merits. The swaggering invincibility of childhood has become awkward and self-conscious.

It’s not easy being a first-generation biologic.

Time of transition

The current decade will see the end of patents covering the 10 top-selling biologics on the market, ranging from anti-
inflammatory therapeutics such as Remicade and Humira to anticancer drugs Avastin and Herceptin. This represents a potential loss of hundreds of millions of
dollars in revenue for their developers as biosimilars quickly find their way to market.

According to a recent
review by Cambridge University’s Bruno Calo-Fernández and Universidad de Santiago de Compostela’s Juan Leonardo Martínez-Hurtado,
sales of biologic pharmaceuticals reached $142 billion in 2011, representing a market share of 19 percent of the global biopharmaceutical market. And almost
40 percent of that value was represented by just 10 products.

As those products fall off the patent cliff, the
urgency will increase to develop new follow-on biologics or hit the market with generic biosimilars. This urgency is further prodded by a variety of social
factors, according to a recent report by RnR Market Research.

Unlike generic small molecules, however, the development and manufacturing rigor for biologics is much more
stringent and so these products are slower to come to market.

The scale of the biosimilar undertaking means that
expectations of future market size can vary wildly. A 2012 report by McKinsey & Co. on emerging biosimilars suggested that the estimated market could be
anywhere from $2 billion to $20 billion by 2020.

“Copying [mAbs] is inherently more complicated, and there
will be greater uncertainty over whether small deviations will have any meaningful clinical effect,” the report read. “The probability of success
in developing these molecules is also like to be lower. Both Teva and Samsung have recently had difficulties in developing biosimilar rituximab [Remicade].”

Using its proprietary plant-cell-based ProCellEx protein expression
system (described in “Medicating Metabolism” in the January 2014
issue of DDNews,), the company is in the early stages of developing a biosimilar version of Amgen’s anti-inflammatory Enbrel (etanercept). An anti-TNF monoclonal antibody, Enbrel is currently being used to treat conditions ranging from
rheumatoid arthritis to plaque psoriasis.

“We’re looking for where we can have an advantage, and what
we’re doing now is combining the new technology of oral administration using the plant cells with the properties of the anti-TNF,” says Protalix
CEO David Aviezer.

As Protalix hopes with its enzyme replacement therapies, an oral formulation of Enbrel would
potentially allow them to maintain a more controlled steady state of the anti-TNF in a patient’s bloodstream rather than the peaks and valleys of the
current drug, which is administered subcutaneously with weekly or twice weekly injections.

And, as Aviezer stated
previously, an oral formulation might facilitate patient compliance, particularly for those with an aversion to needles and/or self-injection. But perhaps
more importantly, he speculates, there may be very direct benefits for some indications of the oral formulation.

“If you look at indications such as colitis or Crohn’s disease, which actually affect the intestines directly, we’ll be able to
deliver the drug orally directly to the target organ, which may be a huge advantage,” he explains. “We’re trying to find a unique niche
here and come with a sophisticated and targeted biosimilar or ‘biobetter,’ in this case.”

At the
moment, Protalix’s oral anti-TNF is being studied in animal models of various inflammatory diseases, but the company expects to initiate Phase 1
studies this year.

Learning your ADCs

While the
workhorses of the first generation have been and continue to be monoclonal antibodies, there has been expanding interest in combining the best of antibody
technology with the best in small-molecule therapeutics in the form of antibody-drug conjugates or ADCs. As DDNews has reported previously, the idea
behind ADCs is to target drugs more specifically via the antibody-antigen interaction and thereby change the therapeutic window of small-molecule
therapeutics as well as hopefully reduce the concomitant side effects.

Although the concept of simply linking a
small-molecule drug to an antibody seems straightforward, the chemistry and design have proven complicated. Finding amino acids with both the right reactive
groups to link to drugs and the right location on the antibody to not inhibit targeting has challenged ADC development historically.

“Because of the limitations of the lysines and cysteines that are represented in too many copies on a given protein or
antibody, it was difficult to do rational chemistry-level control over the modification process,” explains Ho Cho, chief technology officer of ADC-
developer Ambrx.

Furthermore, the sheer numbers of these
amino acids within any given antibody sequence meant that any number or combination of side chains could be modified within a single conjugation experiment,
resulting in a heterogeneous population of molecules.

In a commentary published last July in Scientific
American, Sutro Biopharma’s chief scientific officer, Trevor Hallam, discussed this
challenge in relation to two recently approved ADCs: Seattle Genetics’ Adcetris
(brentuximab vedotin) and Genentech’s Kadcyla (trastuzumab emtansine).

“Adcetris and Kadcyla are both products that consist of many species of antibody-drug conjugate molecules within the
product, differing in the amount and location of cytotoxin linked to the antibody,” he said. “The total number of individual species of molecules
within the product is enormous and may result in species of antibody-drug conjugate molecule with unwanted characteristics, such as lack of binding to the
tumor cell, less stability, poor internalization into the tumor cell or the premature release of the warhead in the blood before it can get to the
tumor.”

To get around this problem, companies like Ambrx, Sutro and Allozyne use various molecular techniques to insert non-natural amino acids at specific locations within the antibody, making drug
conjugation much more precise.

“The selector codon we use is normally used by the genetic system as an amber
stop signal and we repurpose that to code for the amino acid by design,” says Ambrx CEO Lawson Macartney. “We create these novel amino acids that
have functional handles that don’t exist in nature and so we have exquisite control over how the biologic conjugation process is carried out and the
resulting molecule that is created.”

“It is kind of like we put a USB port onto the side of a protein
or antibody, if you will, and then you can use that point of attachment in one case to attach a polymer and extend the pharmacokinetics of the medicine and
in another case, to modify a highly cytotoxic agent in the case of ADCs,” adds Cho.

For Allozyne and its
Biociphering platform, the non-natural amino acids offer azide handles to which different chemical linkers can attach via a variety of chemistries.

Just over a year ago, Allozyne described a preclinical proof-of-concept study that showed their ADC was able to kill
Her2+ breast cancer cells in vivo and that the attachment of the small molecule did not impact antibody binding affinity or pharmacokinetics.

“By precisely controlling both the site and number of linker-toxin conjugates, we have the potential to increase
the safety profile of this rapidly expanding new class of cancer therapeutics and possibly also increase efficacy as well,” said Meenu Chhabra, company
president and CEO, in announcing the findings.

Not just proteins

While much of the conversation about biologics has focused on proteins, there has been steady progress in the development of nucleic acid-based
therapeutics over the years, with much of the focus on RNA. Early efforts were largely designed to silence undesirable genes (e.g., RNA interference [RNAi]),
but many more recent efforts have started to consider the ideals of gene therapy to restore protein expression and functionality.

One of the main players in the RNAi field is Alnylam
Pharmaceuticals, which last November announced the findings of their Phase 2 study of patisiran in the treatment of transthyretin-mediated amyloidosis
(ATTR), a progressively debilitating and fatal condition caused by mutations in the TTR gene. Using RNAi, researchers were able to knock down serum TTR
levels by as much as 96 percent in patients.

“Knockdown of circulating TTR is expected to result in improved
clinical outcomes for patients with ATTR based on data from [familial amyloidotic polyneuropathy] patients receiving liver transplants,” explained
Akshay Vaishnaw, Alnylam executive vice president and chief medical officer, in announcing the findings. “Further, evidence from other systemic
amyloidotic diseases shows that as little as a 50-percent reduction of the disease-causing protein can result in disease improvement or
stabilization.”

These results form the basis of the company’s move into Phase 3 studies with the
APOLLO trial.

Alnylam can expect some competition in ATTR, however, as Arcturus Therapeutics named its RNAi approach to the same target as its flagship program. Using its proprietary LUNAR delivery platform
in preclinical efforts, the company demonstrated more than 75-percent knockdown of serum TTR in non-human primates with a sustained effect for more
than three weeks.

Also last month, Alnylam initiated a Phase 1 trial in the use of RNAi targeting antithrombin for
the treatment of hemophilia and rare bleeding disorders. The candidate, ALN-AT3, is part of the company’s GalNAc-siRNA conjugates program, designed to
target the RNAi molecules to hepatocytes via the latter’s asialoglycoprotein receptor, which should dramatically improve the therapeutic window for
such drugs.

In discussing the GalNAc-siRNA program in December, Muthiah Manoharan, senior vice president of drug
discovery for Alnylam, said: “These new data show that weekly subcutaneous dosing of GalNAc conjugates results in mean steady-state drug levels that
compare very favorably with other oligonucleotide platforms that require 100 to 1000 times greater tissue drug levels to achieve clinically relevant gene
silencing.”

The company’s recent success has drawn a lot of attention that has resulted in both
expansion and investment. Over a two-day period in January, Alnylam announced it had acquired Sirna Therapeutics, the RNAi subsidiary of Merck, and formed a development and commercialization alliance with Genzyme.

With an upfront payment of $175 million in cash and
equity as well as downstream milestone payments and royalties, the Sirna acquisition dramatically expands Alnylam’s RNAi technology portfolio as well
as its pipeline of preclinical candidates.

The Genzyme alliance, meanwhile, sees an upfront infusion of $700
million cash for newly issued stock, giving Genzyme a 12-percent stake in Alnylam, as well as R&D funding and potential milestone payments that could
raise the deal to well over $1 billion.

“In this new alliance, Alnylam benefits enormously from
Genzyme’s proven global capabilities, enabling us to accelerate and expand market access for our ‘Alnylam 5x15’ products,” said
Alnylam CEO John Maraganore at the time. “At the same time, we retain our product rights in North America and Western Europe, where we remain committed
to develop and commercialize our RNAi therapeutics pipeline. We also retain full global product rights for all RNAi therapeutic products outside the genetic
medicine field.”

Meanwhile, on the diagnostic side, the company also published results of their efforts to
monitor tissue-specific RNA silencing through a technique they call circulating extracellular RNA detection (cERD).

Historically, to verify that an RNAi therapeutic is working as intended, researchers measure mRNA levels within tissue samples, which require invasive
biopsies. Using different PCR platforms, however, Alnylam scientists were able to show that circulating mRNA levels—whether in serum or cerebrospinal
fluid—were representative of RNA levels in biopsied tissues and thus could be used to detect mRNA silencing.

“Circulating RNA was found to correspond closely with tissue RNA levels and their modulation by antagonists, suggesting that RNA levels from
biological fluids provide an accurate ‘real-time’ representation of tissue RNA status,” wrote Alfica Sehgal and colleagues in the paper published in RNA. “We envision
that this cERD method will have broad applicability in clinical studies since it allows the routine, accurate and frequent measurement of organ-specific
target gene modulation without the need for tissue biopsies.”

Other companies, meanwhile, are looking at the
possibility of using RNAi technology to control relapse of viral infections.

For example, in November, Arrowhead Research Corp. announced its application to initiate a Phase 2a study of its RNAi
candidate ARC-520 for the treatment of chronic hepatitis B infection, a condition that can lead to liver cirrhosis and is responsible for 80 percent of
primary liver cancers globally.

Preclinical data suggested that ARC-520 not only diminished the levels of Hep B
antigen and DNA, but also seemed to stimulate a reactivation of the immune system, a possible early step in seroconversion and a functional cure.

Being more expressive

As mentioned earlier, however, not all
diseases or conditions require the knockdown of aberrant gene expression but rather the up-regulation or outright replacement of a missing protein. Rather
than supplement patients with the protein of interest, as discussed at length in the January issue of DDNews, some companies are focusing on the
mRNA sequences that code for those proteins.

Moderna
Therapeutics, for example, developed their mRNA Therapeutics platform to generate dozens of candidates for areas such as oncology, cardiology and
immunotherapy. Using nucleotide analogues to minimize patient immune responses, the company injects synthetic mRNA into the patient where it is taken up by
cells and begins to produce proteins that remain intracellular, are inserted into the cell membrane or are secreted into the circulation depending on the
protein.

As a proof-of-concept, Moderna published the results of a mouse model of myocardial infarction in
Nature Biotechnology. By injecting mRNA encoding the growth factor VEGF-A into damaged heart muscle, they were able to stimulate endogenous stem
cells to regenerate blood vasculature, which led to improved heart function and long-term survival compared to placebo.

The announcement came just months after Moderna signed a strategic option agreement with AstraZeneca, which has a particular interest in what it describes as “cardio-metabolic medicine.”

In January, the preclinical success of Moderna’s platform led to an investment of $100 million from Alexion Pharmaceuticals as part of a discovery and development agreement that also has the potential for commercial milestone and royalty
payments.

One day later, Moderna announced the creation of Onkaido Therapeutics, founded largely on the preclinical oncology pipeline of its parent.

“Basic
research in the past decade has uncovered innumerable targets in cancer, but our ability to reach them therapeutically remains limited,” said Stephen
Hoge, Onkaido founding CEO, who will also maintain a role as Moderna’s senior vice president of corporate development and new drug concepts. “We
are thrilled and humbled by the opportunity to use this new modality to do things that have never been done before in the fight against cancer.”

Taking a slightly different tack with mRNA therapy, CureVac
has developed a vaccine platform called RNActive, in which mRNA molecules are designed to encode for antigens of infectious disease or cancers. When mRNA is
injected into patients, antigen expression stimulates the immune system to attack cells producing the antigen.

Last November, CureVac announced a collaborative alliance with the Cancer Research
Institute and Ludwig Cancer Research to facilitate clinical testing of its cancer
immunotherapy portfolio, with particular focus on CV9202, which expresses six different NSCLC-associated antigens.

“Combining immunotherapy approaches holds great potential for the treatment of cancer,” said Ludwig Executive Director of Technology
Development Jonathan Skipper. “Our collaboration will enable us to combine this novel technology with different immunotherapeutic approaches to attack
a patient’s cancer on multiple fronts and therefore decrease the chances of immune escape.”

As though
to prove Skipper’s faith in the approach, CureVac announced one month later the completion of recruitment for its Phase 2b trial of its RNActive
candidate CV9104 for the treatment of prostate cancer.

A beautiful view

Thus, despite the doom-and-gloom of the pending patent cliff, the view into the future of biologics is spectacular with every
reason to believe that any fall in the fortunes of one or more products will be cushioned by novel reformulations, chemical reinventions, innovative
applications or completely novel therapeutic approaches.

Pet
projects

One market in which first-generation biologics may see a second life is in the area of
veterinary care, and in the case of Kindred Biosciences, in the submarket of companion
pets—cats, dogs and horses.

“The companion animals space is a relatively new sector because, although
pets have been with us for a long time, it is only recently that they have become family members,” explains Kindred CEO Richard Chin, who has worked on
the development of a number of biologics for human patients.

To prove his point about the market shifting, he
quotes numbers suggesting that Americans spent $370 million last year alone on Halloween costumes for their dogs, something unheard of a decade or so
earlier. And perhaps more relevant to this discussion, $1.5 billion was spent on knee surgery and ACL repair for dogs last year.

As Chin explains, people are willing to pay several thousands of dollars on their pets, and the continually dropping costs of
developing biologics means that his company can produce biologics at a low enough cost where we can meet that price point.

But what goes into developing such treatments for Fluffy and Sparky?

Kindred works in both the small-
molecule and biologics space, the former being decidedly easier to reformulate for pets.

“For small
molecules, we repurpose the drugs so that they’re flavored, chewable and palatable,” Chin says. “With the biologics, we are actually making
the proteins and antibodies with the animal sequence. It is immunogenic if you just take the human biologic and bring them over.”

In picking its opening salvo in the pet biologics market, Kindred decided to tackle the low-hanging fruit of what was
available in the human market. The company is presently working on a dog version of Enbrel (etanercept) and Orencia (abatacept), as well as planning to make
the dog version of Xolair (omalizumab).

Reversing the classical human preclinical-clinical paradigm, Chin jokes:
“We will not put any drug into dogs or cats until it has been tested in people.”

In the human drug
stream, the shift from animal models to human patients is often not a very smooth one. Part of the problem, as Chin explains it, is that researchers are
looking at models of disease rather than the disease itself.

“If you’re doing drug development in a
mouse model of cancer—you take a mouse, you inject in cancer cells under the skin, you get a lump, you make that go away—but that’s not
really cancer,” he says. “If you took those drugs that worked in those models of cancer in mice and you gave it to mice with real cancer, it
probably wouldn’t work.”

The difference when looking at a dog with cancer, Crohn’s disease or
diabetes, he suggests, is that here it is the real disease.

“Species are very similar. Between a mouse
that’s been manipulated to look like they have a certain disease compared to a human with an actual disease, there is a poor correlation. But a pet
with a disease compared with a human with the same disease, it turns out the correlation is quite good.”

Other advantages of the pet market over humans are the sheer speed and costs of development.

“We can
develop a drug in three years or so,” offers Chin. “I spent most of my career on the human side where development takes 10 years, 15 years. This
is like being on a rocket ship.”

He also says that whereas you could do a Phase 3 study for about $3 million
30 to 35 years ago, those days are long gone and even a Phase 1 study would be difficult for that budget.

“It costs somewhere between $50,000 and $100,000 per patient,” he says, versus doing a dog study for $1,000 per animal.

Chin even takes in stride the knock of veterinary drug markets being smaller than those for humans, acknowledging that it is
true.

A blockbuster in the pet market is a drug that takes in about $100 million, so one less zero than its human
counterpart. But that, he says, is only part of the equation of return on investment.

“You can take two zeroes off the development
costs,” he laughs. “So instead of $500 million or $1 billion, we can do it for $5 million or less, so the return is really great.”